Property Transactions Flashcards Preview

What is the basic calculation for basis in property?

Cost of property + Purchase expenses + Debt assumed + Back taxes and interest paid = Basis. Note: taxes and interest related to time when a taxpayer did not own the property are not deductible - they are added to basis.

2

What is the recipient or donee's basis on gifted property?

Sold at a gain: use donor's basis

Sold at a loss: use lesser of donor's basis or FMV at time of distribution

Sold in between donor's basis and FMV: No gain or loss

3

What is the basis and holding period of inherited property?

FMV at date of death or alternate valuation date (6 months later)

If alternate date is elected by property is sold before 6 month window; use FMV at date of death.

Property inherited is LTCG property regardless of how long it is held by the recipient.

4

What is the holding period on a stock dividend?

Holding period of new stock received from a dividend takes on the holding period of the original stock

5

What property is eligible for like-kind exchange treatment?

Real for real or personal for personal business property only

US property only

6

What is BOOT in a like-kind exchange?

Cash received + unlike property received + liability passed to other party

7

In a like-kind exchange; how is it handled if a netting of mortgages results in net boot paid?

DO NOT subtract the boot paid amount from the cash received

Ignore the boot paid amount from the mortgage completely

8

What is an involuntary conversion? When does it not result in a gain?

Occurs when you receive money for a property involuntarily converted

There is no gain if you reinvest the proceeds completely

If proceeds not completely reinvested; gain is LESSER of realized gain or amount not reinvested.

9

What are the requirements for exclusion of gain on a primary residence? How are losses treated?

Must live there 2 out of 5 years

Loss on sale of home is NOT deductible

10

What is a wash sale?

30 Day rule applies

Disallowed loss adds to basis of new stock

New stock takes on date of acquisition of old stock

11

Who is considered a related party in a property transaction? How does it affect the transaction?